Better hospital quality linked to stronger margins: Vizient study
Hospitals in Vizient’s top tier for quality performance reported an average operating margin of 6.3% in late 2025, while hospitals with the lowest quality posted a -3.6% operating margin, according to a Vizient study published March 16.
To examine how quality rankings correlate with financial performance, Vizient analyzed data from more than 1,000 hospitals participating in its clinical database. The healthcare performance improvement and purchasing organization calculated hospitals’ operating margin through Medicare cost reports plus a patient care and other operating methodology.
The analysis “found a strong correlation between top-tier quality performance and improved operating margins, lower risk-adjusted direct costs and stronger commercial reimbursement,” the company said in a March 17 news release.
Here are two key findings from the report:
- Hospitals in the top-quality quintile had an average direct cost index of 0.95, compared to 1.15 among those in the lowest quintile for quality performance. The lower index for high-quality hospitals mean their risk-adjusted costs per discharge were significantly lower, Vizient said.
- Top-quality hospitals negotiated commercial reimbursement at 257% of Medicare, compared to 211% for the lowest-performing group.
Madeleine McDowell, MD, senior principal at Vizient’s research arm, Sg2 Intelligence, said quality stabilizes hospitals and health systems beyond what appears on quarterly reports, such as avoiding penalties, malpractice claims and regulatory scrutiny.
“When care is delivered reliably and complications decline, resource intensity falls with it,” Dr. McDowell said. “Fewer hospital-acquired conditions, preventable readmissions and downstream adverse events mean less waste embedded in the cost structure. Efficiency and outcomes, in turn, influence reputation and payer negotiations. Organizations with measurable performance bring a different level of credibility to contracting conversations. Over time, stronger reimbursement creates room to reinvest in workforce stability, analytics, care redesign and digital infrastructure.”
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